Friday, January 22, 2010

New UCL class certification decision: Steroid Hormone Product Cases

Another case interpreting Tobacco II has been handed down, and this one, like Weinstat a couple of weeks ago, refutes the Cohen court's interpretation.

In Steroid Hormone Product Cases, ___ Cal.App.4th ___ (Jan. 21, 2010), the Court of Appeal (Second Appellate District, Division Four) reversed an order denying class certification of UCL and CLRA claims. The case alleged that the defendant (GNC) sold nutritional supplements containing a controlled substance that was illegal to sell or possess without a prescription, and that the defendant failed to disclose to consumers that its product contained this illegal ingredient. Slip op. at 3-4. The plaintiff class consisted of all those who purchased the supplements. See id., passim.

The trial court denied class certification "on the ground that, with regard to both the UCL claim and the CLRA claim, an individualized inquiry would have to be conducted into whether the illegality of androstenediol products was material to each purchaser, to determine whether GNC’s alleged conduct caused injury to that purchaser." Id. at 8.

The Court of Appeal disagreed. Under Tobacco II made clear that "the standing provision added by Proposition 64 'was not intended to have any effect at all on unnamed class members.'" Id. at 10 (quoting Tobacco II, 46 Cal.4th at 321.) "Therefore, while a named plaintiff in a UCL class action now must show that he or she suffered injury in fact and lost money or property as a result of the unfair competition, once the named plaintiff meets that burden, no further individualized proof of injury or causation is required to impose restitution liability against the defendant in favor of absent class members." Id. (emphasis added).

This holding is directly contrary to Cohen.

The defendant raised the argument that the Cohen court found persuasive, namely, that Tobacco II merely addressed "standing" and was not relevant to class certification. This panel did not read Tobacco II that way:

GNC tries to avoid the required reversal by arguing in its respondent’s brief that the trial court’s ruling does not conflict with Tobacco II because Tobacco II addressed standing, while the trial court specifically stated that standing was irrelevant to the certification analysis. Although the court did state that standing was irrelevant, it nevertheless found that Proposition 64 added actual injury as an element of a cause of action for restitution under the UCL, and therefore injury must be established for each class member. Tobacco II made clear, however, that Proposition 64 only affected the named plaintiff’s standing in a UCL class action seeking restitution; it did not add an additional element to be satisfied by all class members.

Id. at 10-11 n.8 (citing Tobacco II, 46 Cal.4th at 321) (emphasis added). In other words, the Steroid Hormone Product Cases court recognized that because reliance and injury are not elements of a UCL claim, they are irrelevant to class certification. The court concluded that class certification should have been granted because common questions predominated:

Martinez’s UCL claim presents two predominate issues (other than Martinez’s individual standing), both of which are common to the class: (1) whether GNC’s sale of androstenediol products was unlawful; and if so, (2) the amount of money GNC “may have . . . acquired by means of” those sales that must be restored to the class (Bus. & Prof. Code, § 17203).

Id. at 11.

As for the CLRA claim, the doctrine of presumed reliance based on the materiality of the undisclosed information warranted class certification of that claim as well:

[Plaintiff] correctly argues that he is entitled to show that GNC’s alleged deceptive conduct caused the same damage to the class by showing that the alleged misrepresentation was material, even if GNC might be able to show that some class members would have bought the products even if they had known they were unlawful to sell or possess without a prescription. [Citation.] In other words, if Martinez can show that “‘material misrepresentations were made to the class members, at least an inference of reliance [i.e., causation/injury] would arise as to the entire class.’”

The court then reaffirmed the "reasonable consumer" standard for CLRA cases, explaining:

the question that must be answered in this case is whether a reasonable person would find it important when determining whether to purchase a product that it is unlawful to sell or possess that product. It requires no stretch to conclude that the proper answer is “yes” -- we assume that a reasonable person would not knowingly commit a criminal act.

Id. at 14 (citing Civ. Code § 3548; Garnette v. Mankel, 71 Cal.App.2d 783, 787 (1945)). Finally, the court rejected the argument that a "reasonable bodybuilder" standard should apply instead, as well as the argument that "as a rule, bodybuilders care less about legality than non-bodybuilders." Id. Bodybuilders as a class will no doubt appreciate the vindication.

Comments

A good analysis, as always, and congratulations on your front-page coverage the other day! Well-deserved.

Just to give the defense point of view, though, I am puzzled as to how this line of cases is consistent with the Prop 64 requirement that the class rep must comply with CCP 382. I think we would agree that reliance and injury are "elements of a UCL claim" at least as to the class rep. If we do agree on that, then how can they be "irrelevant to class certification" since CCP 382 also applies? The court has to consider whether the rep's claims are typical of the claims of those he or she represents, so if the rep's claims include these elements, aren't they relevant to certification? The Steroid Products case doesn't address this issue.

Whatever the ultimate answer turns out to be on this issue, thanks for continuing to crank out this great blog. Glad to see you getting some coverage in the print media too.

Reliance and injury are irrelevant to class certification because neither the class representative nor the class members must prove them to establish the defendant's liability at trial. They are not elements of a UCL claim. Therefore, to grant certification of a UCL claim, there is no reason to consider whether common questions predominate on any hypothetical reliance or injury elements. That is why the courts' analyses in Weinstat and Steroids (and, for that matter, Tobacco II itself) ended where they did.

The class representative must prove reliance and injury to have standing, but that does not have anything to do with what the class members have to prove. Proving whether the individual class representative personally relied or suffered injury does not raise any broadly non-common questions, because only that one person has to prove those elements. That can easily be done through a declaration or deposition testimony from the class representative.

For class certification purposes, the question is what will have to be proven at trial by the class to establish the defendant's liability. Neither reliance nor injury need be proven.

As for typicality, the class representative's UCL claim is identical to the class members' UCL claims. The claim does not include reliance or injury as elements.